AUSTRALIA'S cotton producers look likely to reap a bonanza crop this year at some of the highest dollar prices seen since the American Civil War of 1861-65 -- if they have a crop to deliver.
Adam Kay, chief executive of industry group Cotton Australia, said several Queensland growers around Theodore and Emerald and on the Darling Downs had in recent weeks had their crop "completely washed away". In some cases they had sold forward at about $500 a bale and were now required to fulfil contracts by buying back at a current price about $800.
"Some of the Theodore producers have now lost their crop for the second year in a row," he said, adding that the big wholesale merchants on the other side of the hedge contracts were working out terms that would allow the affected growers to stay in business.
"These growers are having to source cotton at maybe $300 a bale more than they were paid, and there's not a lot of crop left to buy out there."
Mr Kay said that before the floods, the estimate for the Australian 2011 cotton crop was for 4 million bales, almost all for export, but that the floods had seen that estimate cut back by about 10 per cent to 3.6 million.
That will still smash the record of 3.52 million bales set in 2001.
The US price, which is closely mirrored in Australia, hit a 140-year high last week of $US1.6789 a pound for near-term futures. Back in the Civil War there was no futures market but the Mississippi Historical Society has records showing it hit $US1.89 a pound at that time.
There are 500 pounds, or 227kg, in a bale, valuing an $800 bale at $1.60 a pound. The Australian and US currencies are almost at parity.
Gordon Cherry, managing director of Brisbane-based buyer Louis Dreyfus Commodities, said that huge Asian demand for cotton and a succession of supply blockages in recent months had sent prices sharply upwards.
"China's a producer but the shortfall this year between its production and demand could be as high as 15 million bales," he said.
"Demand in many Western countries dropped away after the global financial crisis in 2008 but Asia was far less affected, particularly China and India.
"In the US, which is usually seen as the supplier of last resort, sales have run way ahead of the normal pattern and the Australian 2011 crop is now very well sold."
Mr Kay discounted recent US reports that the latest US price jump was caused by the Queensland floods.
"I simply can't see how the loss of 400,000 bales in a global market of 125 million bales is going to make that much difference," he said.
He and Mr Cherry pointed to the Pakistan floods early last year, and export limitations in India, as the kind of supply factors that had helped push global prices up to the current levels. The Indian government imposed a cap of 5.5 million bales on its exports in 2010-11.
Mr Cherry said that the sunny weather that had followed the floods in Queensland's cotton growing areas might allow some previously flooded crops to get a chance to re-shoot if they were cut back. "We had forecast a crop of around 4.2 million bales and see likely losses closer to 350,000 bales than 400,000 so we may see the Australian crop yet exceed 3.8 million bales," he said.
By comparison, the 2009-10 drought year saw total Australian production of 1.8 million bales or less than half the most pessimistic forecast for the 2010-11 crop.
